Mall landlords are increasingly walking away from struggling properties, leaving creditors in the lurch and posing a threat to the values of nearby real estate, The Wall Street Journal reports.
As competition from online retailers batters store owners, some of the largest U.S. landlords are calculating it is more advantageous to hand over ownership to lenders than to attempt to restructure debts on properties with darkening outlooks.
That, in turn, leaves lenders with little choice but to unload the distressed properties at fire-sale prices.
Between January and November 2016, 314 loans secured by retail property—totaling about $3.5 billion—were liquidated, 11% more loans than in the same period a year earlier, according to data from Morningstar Credit Ratings. The liquidations resulted in a loss of $1.68 billion.
“We’re seeing a boatload of these kinds of properties coming to market,” says James Hull, managing principal of Augusta, Ga.-based Hull Property Group, which bought five malls from foreclosure sales in 2016. “There have been some draconian losses for the enclosed-mall business.”
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